Europe’s insurance industry has called on the European Union to prioritise delivering the Capital Market Union (CMU) to drive growth, prosperity, and improve its global competitiveness. In a paper published today, Insurance Europe argues that the CMU should focus on increasing retail investment, diversify sources of funding for EU businesses and create a conducive environment for EU companies to innovate, compete and grow.
The CMU was launched ten years ago as a plan to create a single market for capital, increasing the flow of investments and savings across the EU. The position paper highlights the insurance industry's vital contribution not only by providing financial protection, but also by offering pensions and savings and as a major long-term institutional investor: European insurers invest close to €9.5 tn in the economy and 69% of their investments in equity, corporate and sovereign bonds are within the EU.
Olav Jones, Deputy director general, commented, ‘The Capital Markets Union must be a priority to unleash investment that delivers a green, digital, globally competitive Europe. The EU needs to now focus on unlocking more retail investment, reducing overregulation and reporting, and increasing access to SME equity, venture capital, SME debt and infrastructure. By delivering these objectives, the insurance sector can contribute financing the green and digital transition and continue to invest long-term. This will boost growth and create more jobs, paving the way for a financially and economically stronger Europe.’’
Insurance Europe – the federation of insurance and reinsurance companies – calls for the CMU to focus on:
1/ Making it easier for consumers to invest in savings and pension products A study showed that 72% of citizens were not investing in any financial product. Through the Retail Investment Strategy, the EU needs to raise awareness whilst making it simpler and easier for Europeans to invest in savings and pension products.
2/ Improve prudential rules which act as barriers The ongoing Solvency II Review – the EU’s prudential regulatory regime - needs to address current excessive capital and volatility which is resulting in unnecessary barriers for long-term, guaranteed and profit sharing products, as well as investment.
3/ Improve financial and insurance education and nudging mechanisms This is vital to ensure Europeans are equipped with the knowledge, confidence and skills necessary to improve their understanding of financial products. Pension dashboard and tracking systems can nudge and help citizens to invest more.
4/ Increase insurers’ access to SME equity, venture capital, SME debt and infrastructure Such funds provide the scale and access for a wide-range of insurers to invest in these asset classes. Actions should be taken to assess where and why such funds have been successful and how their use can be expanded.
6/ Facilitate greater cross-border investment Increase trust and confidence in cross-border investment within the EU, by making progress in the areas of insolvency law and increasing intra-EU investment protection.
7/ Reduce the EU regulatory overload The European Commission should deliver its commitment to reduce regulatory reporting by 25%. The industry also calls for new regulation to only be introduced when truly needed and that it be simpler, proportionate, avoiding unintended consequences.